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California Governor Jerry Brown signed 2 bills that create new legal structures for social entrepreneurs, at the eleventh hour on Sunday, October 9th, 2011.With a few days for the blogosphere and twitterverse to react and inform, here’s a list of blog posts and resources about the new social innovation legislation.(Note: feel free to add on […]

With the midnight passage of AB 361 (benefit corporations) and SB 201 (flexible purpose corporations) you can imagine that the social media is abuzz with the news.(Learn more about the passage of AB 361 and SB 201, and learn about the key points of both the bills)Here’s what we’ve heard

“Entrepreneurs, investors and consumers are calling for this type of legislation,” said Assemblymember Huffman. “They believe this is the start of something transformational. AB 361 rolls out the welcome mat for businesses and investors ready to create high quality jobs in California and make economic and social contributions that will improve the quality of life in communities across to our state for years to come,” said Assemblymember Jared Huffman (sponsor of AB 361)

Assemblymember Jared Huffman issued an official press release this morning, following the approval of AB 361 (benefit corporations) legislation by the Governor just before the midnight deadline last night.You can also read more about the process and passage of AB 361 here.AB 361 Signed Into Law

In reviewing the last batch of the nearly 600 bills that he had to process, California Governor Jerry Brown signed into law both social innovation bills—just in time for the midnight deadline on October 10th, 2011.Both AB 361 (benefit corporations) and SB 201 (flexible purpose corporations) which create new legal structures for social enterprise are now officially California law.You can read the key points of each bill here.Read the official legislative update from the Governor’s office here.

California is #6

The passage of the benefit corporation legislation makes California the 6th state to recognize a new form of corporation that is for-profit and committed to creating a positive impact on society and the environment. California joins Maryland, Vermont, Hawaii, Virginia, and New Jersey in the benefit corporation club.

Non-urgent bills such AB 361 and SB 201 signed into law will become effective January 1st, 2012. Until then, social entrepreneurs interested in becoming among the first benefit corporations in California, can use the time to decide which legal structure is the best fit, and become prepared to meet the various requirements.

Attorney Donald Simon shares some tips on how a company can get ready for benefit corporation certification or re-certification as a benefit corporation in these two videos:

Meet Attorney Donald Simon

Attorney Donald Simon explains a few terms related to California’s benefit corporation legislation (AB 361) in the interview below. Simon is a Partner at Wendel Rosen Black & Dean LLP and co-author of AB 361–legislation that would create a new for-profit corporate form in the state for companies wishing to earn a profit while also creating a positive impact on the environment and community.

He also explains what the third-party standard is, and the role it will play in assessing a company’s impact on the community and environment. Finally, Simon lays out the supermajority shareholder requirement of AB 361.Simon also offers a few tips and suggestions to social entrepreneurs who are considering incorporating or reincorporating as a benefit corporation.Shift in Business As UsualWhether you think of the move towards a greener economy as quick turn to consider more than a singular bottom line, or you view it as part of the gradual evolution of the way business is done–you will have noted a shift in business as usual.Former President Bill Clinton recently discussed the changing economy, and interconnected role of private and public sectors in an interview about jobs and the green economy.

And notably, California is not first on the scene of the benefit corporation party. In fact the first state to pass benefit corporation legislation was Maryland, followed by Vermont, Virginia, New Jersey, and Hawaii. Similar bills are proceeding through the legislative process in New York, Pennsylvania, North Carolina, Colorado, and of course, California.

The Update on AB 361

Despite the interview’s consideration of terms that will come into effect ‘once’ the bill is passed, in reality, there is no guarantee that AB 361 will become new law. It is currently awaiting Governor Jerry Brown’s review. You can read a full update on AB 361 here, and also learn how to support these efforts to enact legislation supporting social entrepreneurship.Related Posts:

If you have been following the news of AB 361–the CA bill that would create a new corporate form for social enterprise called a benefit corporation. You may be wondering about the status of the bill.In Review

3. Sign the Care2 petition in support of AB 361. You can read more about the petition and use the widget here. It is a quick and easy way to show your support.

4. Write a letter to Governor Brown’s office. With nearly a month of time on the clock, there is ample opportunity to get involved and write in your support for corporate structures for social enterprise. You can read a sample letter here.

If you have even skimmed the contents of this blog you likely know about AB 361, the California legislation that would create a new corporate form for social enterprise called a benefit corporation.

You may not have heard of SB 201, however. It is a different bill that also proposes a new corporate form for social enterprise in California, called a flexible purpose corporation.

Note: it is great coincidence that there are 2 social enterprise bills heading to the Governor’s desk at the same time. Additionally, they are not mutually exclusive—i.e. both bills can be passed into law. In fact, arguably, the fact that there are 2 different social enterprise bills seem do twice as much to suggest that the time is ripe for legislation recognizing social enterprise in California.

Key Features of AB 361 (Benefit Corporations)

Read the full text of AB 361 here. Summaries of key features are numbered in bold, while text exactly or very closely mirroring the actual language of AB 361 is in italics.

1. Creates Benefit Corporations (benefit corps).This bill would authorize and regulate the formation and governance of a new form of corporate entity known as a benefit corporation.

2. Existing corporations can become benefit corps with 2/3 shareholder vote.The bill would also permit an existing corporation to become a benefit corporation by amendment to its articles of

incorporation, as specified, adopted by at least a minimum status vote (2/3 of vote or greater if required by articles of incorporation) and would permit a corporation to become a benefit corporation through a merger, reorganization, or conversion, or domestic other business entity, as specified.

3. Benefit corps must create material positive impact on society and the environment, as determined by an independent 3rd-party standard. The bill would provide that a benefit corporation may be formed for the purpose of creating general public benefit, defined as a material positive impact on society and the environment, taken as a whole, as assessed against a 3rd-party standard.

Third-party standard is a comprehensive assessment of the impact of the business developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries and where: A) not more than 1/3 of members of the governing body of the entity are representatives of associations of businesses in a specific industry, businesses whose performance is assessed against the standard; and B) the entity is not materially financed by an association of business described in (A).

Additionally, the third-party standard must be developed by an entity that accesses necessary and appropriate expertise to assess overall corporate social and environmental performance; and uses balanced multistakeholder approach, including a public comment period of at least 30 days to develop the standard. The following information on the 3rd party standard must be made publicly available: criteria considered when measuring the overall social and environmental performance.

4. Benefit corps may be formed to create a general public benefit and can also identify additional specific public benefit(s). The bill would also provide that a benefit corporation may identify one or

more specific public benefits as an additional purpose of the corporation. Examples of specific public benefit include: providing low-income/underserved individuals or communities with beneficial products/services, providing economic opportunity beyond creation of jobs, preserving the environment, improving human health, promoting arts, science, or advancement of knowledge, increasing capital to entities with a public benefit purpose, or another particular benefit to society or the environment.

5. Board members must consider multiple stakeholders (including shareholders, beneficiaries of the public benefit, the environment) when making business decisions.This bill would require directors to consider the impacts of any action or proposed action upon specified considerations, including, among others, the shareholders and employees, and of customers who are beneficiaries of the general or specific public benefit purposes, and the environment, and would allow directors to consider the impacts of those actions on, among other things, the resources, intent, and conduct of any person seeking to acquire control of the benefit corporation.

6. Certain reporting accounting and transparency formalities must be met.This bill would require the board of directors to prepare a specified statement relating to the public benefit purposes of the corporation. The bill would require the benefit corporation to prepare an annual benefit report.

7. Duties of director/officer with regard to public benefit may only be enforced in a benefit enforcement proceeding.This bill would include provisions governing the fiduciary duty

and liability of an officer or director of a benefit corporation. The bill would provide that the duties of a director or officer, and the general, and any specific, public benefit purpose of a benefit corporation, may be enforced only in a benefit enforcement proceeding, as defined, that would be permitted to be commenced or maintained only as specified.

Additional Features:

8. Is part of a nation-wide effort to create benefit corporations in various states. As of writing this 6 states have passed benefit corporation legislation.

9. There is an option for a voluntary certification. B corporation is a voluntary certification which calls for many of the same features as a benefit corporation. A company can choose to be both/either a B corporation and a benefit corporation (if their state has passed legislation)

Key Features of SB 201 (Flexible Purpose Corporations)

Read the full text of SB 201 here. Summaries of key features are numbered in bold, while text exactly or very closely mirroring the actual language of AB 361 is in italics.

1. Creates Flexible Purpose Corporations (flexible purpose corps). This bill would enact the Corporate Flexibility Act of 2011 and would authorize and regulate the formation and operation of a new form of corporate entity known as a flexible purpose corporation.

2. Existing corps can become flexible purpose corps with 2/3 vote of shareholders. The bill would authorize existing corporations and other forms of business entities to merge into or convert into a flexible purpose corporation upon completion of specified requirements, including approval of the transaction by a supermajority 2⁄3 vote of shareholders, or a greater vote if required in the articles, as specified.

3. Flexible purpose corps can convert to corp, non-profit, etc.The bill would also authorize a flexible purpose corporation to convert into a nonprofit corporation, a corporation, or a domestic other business entity, upon satisfaction of equivalent conditions.

4. Can provide dissenters’ rights of appraisal for shareholders.The bill would also provide dissenters’ rights of appraisal for shareholders voting against certain transactions, as specified.

5. Must list special purpose and complete corporate formalities.The bill would specify the required and permitted contents of articles of incorporation that a flexible purpose corporation would be required to file with the Secretary of State, including the special purposes, in addition to any other lawful purpose, that the corporation shall engage in, which may include, but are not limited to, charitable and public purpose activities that could be carried out by a nonprofit public benefit corporation.

6. Requires managers/directors to specify objectives for assessing achievement of special purpose. Certain formalities related to accounting and transparency must be met.The bill would also require management and directors to specify objectives for measuring the impact of the flexible purpose corporation’s efforts relating to its special purpose, and to include an analysis of those efforts in annual reports, together with specified financial statements, to shareholders and would require specified information to be made publicly available, as specified.

The question of whether California will create a new corporate form to recognize socially responsible business will be answered soon. The bill (AB 361) has successfully made its way to Governor Jerry Brown’s desk for final review and approval.

And now Care2.com–an online community of over 16.5 million members committed to social, environmental, and animal welfare— is giving you a quick and easy way to show your support for California’s benefit corporation bill.

1. Send an email or letter of support to Governor Brown. Read more on where to send here.

2. Keep up with the latest news on AB 361. Stay tuned to news from B Lab blog, or on any of the websites mentioned above, and right here on Innov8Social.

3. Read the Official Fact sheet on AB 361. Take a look at the official AB 361 fact sheet released by Assemblymember Huffman’s office. It contains information on the benefit corporation legislation, its background, requirements, as well as a partial list of supporters and opposition.

4. Get plugged in to the LinkedIn conversations on AB 361. There have been a number of discussions started on LinkedIn regarding California’s benefit corporation legislation. Take a look here and here and share your thoughts.

It was the idea of combining two powerful concepts of entrepreneurship and social cause that inspired the start of Innov8Social. And though Innov8Social launched in 2011, the concepts have been marinating for much longer.One such concept that has shaped this site is the idea of for-profit entities that are also committed to doing good. And the more we have learned about the B/benefit corporation movement, the more compelling it has become. It is the start of a conversation on sustainable enterprise that will no doubt be epic and that has the potential to change the way we see and do business.

California’s version of the benefit corporation legislation is AB 361. And perhaps what is most appealing is the simplicity and unintrusiveness of the bill. It is voluntary—a choice for boards of directors to discuss, and for shareholders to decide.

If anything, AB 361 is starting this chat with a question…if we create a new type of business to recognize social enterprise, will they come?

Passing AB 361 lets this question be asked to California businesses and consumers. Read below to read Innov8Social’s letter of support for AB 361 to Governor Jerry Brown.

https://www.innov8social.com/wp-content/uploads/2010/09/social-innovation.png340340neetalhttps://www.innov8social.com/wp-content/uploads/2015/09/logo_web.pngneetal2011-08-30 18:52:002015-08-04 03:46:20Innov8Social's Letter of Support for AB 361 to Governor Brown

In a vote of 57-17*, AB 361—California bill that would create a new corporate form called benefit corporation—passed its concurrence vote in CA Assembly today.

It is now on the way to Governor Brown’s desk where it will be for 12 days or less for his review and signature.

This is a key time to express support for AB 361. AB 361 support letters, calls, op-ed pieces, blogs, tweets, personal meetings, emails and faxes can be directed to Brian Putler, Deputy Legislative Secretary, Fax: 916-558-3177.

You can catch up on the progress of AB 361 as well as read a fact sheet about the bill through links on this recent post: